E-Commerce Models

Min Ding

Pennsylvania State University

Today’s Topics Where is the money? -- Revenue Sources Get the money -- E-commerce Models It’s not just about new revenue -- other stuff

you could do with a website Common Network Structure of a Firm

Banner advertising (per exposure) Prospect fees (per click-through) Sales commissions (affiliates, Amazon.com) Sponsorship (fixed payment) Alliances (exclusive deal, Yahoo and Amazon)

What of the above revenue sources did you propose in your class project?

Indirect Revenue SourcesGetting money from businesses (advertisers)

Risk and ReturnComparing Various Indirect Revenue Sources

SponsorshipFixed Payment

Banner AdsImpressions

Prospect Fees

Click Through

Sales Commissions

Purchase

Risk Increases for the Web Site Being Paid

Sponsorship Banner Ads: Prospect Fees & Sales Commissions:

Source: POIM

Correlation between bargaining power and the types of indirect revenue sources used?

Site/Advertiser Indirect

Revenue SourcePowerful sites (yahoo.com) Sponsorship

Puny sites (Our class project?) Banner Ads

Powerful advertisers (Amazon.com) Prospect Fees

Puny advertisers (Our class project?) Sales Commissions

Q. Should we avoid risk as much as possible?

Product sales Pay-per-use (?) Subscriptions (WSJ) Bundle sales (Science)

What of the above revenue sources did you propose in your class project?

Direct Revenue SourcesGetting money from users (consumers)

E-Commerce ModelsSource: Net Ready

E-Storefront InfomediaryTrust IntermediaryE-commerce Enabler Infrastructure Providers/Communities of

Commerce

E-Commerce ModelsE-Storefront

What is it: Online analogue of traditional ways of selling

products or services. Offers:

Products, services, content Revenue Stream:

Product/service margin, advertising Examples:

www.bestbuy.com

E-Commerce ModelsInfomediary (content aggregator)

What is it: An entity that brokers content, information,

knowledge, or experiences that add value to a particular E-commerce transaction.

Offers: Buyer broker (www.comparenet.com) Seller broker (www.autobytel.com) Transaction brokers (www.travelocity.com) Communities of Interest (COIN, www.verticalnet.com)

Revenue Stream: Subscription fees, advertising, partnership fees, % of

transaction fees

E-Commerce ModelsTrust Intermediary

What is it: An entity that creates trust between the

buyer and the seller.Representative types:

Payment Enabler (secure transaction, www.verifone.com)

Trust Enabler (create a trusted or authenticated environment, www.tradesafe.com)

Revenue Stream: Subscription fees, licensing fees

E-Commerce ModelsE-Business Enabler

What is it: An entity that provides a component or

functionality and adjunct services to enable and lubricate other E-storefronts or infomediaries.

Revenue Stream: Licensing fee, partnership fee, % of transaction

Examples: Federal Express (www.fedex.com) Onsale (www.onsale.com provides the auction

engine for Yahoo!)

E-Commerce ModelsInfrastructure Providers/Communities of Commerce

What is it: Members aggregated across a set of

complementary interests (products, content, and service) and markets; communities of enterprises organized around common interests through a common infrastructure..

Revenue Stream:

Examples: www.chrome.com (dealers, banks, credit unions,

insurance companies)

My Take on E-Commerce Models

Where does collaborative commerce fit in?

External Software Distribution User Manuals Net Surveys Online Customer Support Online dealers/suppliers Support

Internal Corporate Intranets

It’s not just about new revenues-- getting things done, the cheaper way

Common Network Structure Inside a Firm

the public Internet, managed by the marketing department

the extranet, connects the company with it’s major suppliers

the intranet, available only to the company’s employees

Summary (and remember!) Understand potential revenue sources. Understand the e-commerce models. Know what are intranet and extranet.

Sample Final Question

I will give you 5 randomly selected e-commerce sites, and you will be asked to identify the business models and potential revenue sources for each site.